Aluminum reached a four-year low in London after manufacturing contracted in China, the biggest consumer of industrial metals, and the Federal Reserve slowed U.S. economic stimulus again. Zinc slumped.
A Chinese factory gauge from HSBC Holdings Plc and Markit Economics Ltd. showed a final January reading of 49.5, below the level of 50 separating expansion and shrinkage. The Fed said yesterday its monthly bond-buying will fall by another $10 billion. Last month’s initial reduction of stimulus triggered drops by emerging-market currencies and equities.
“The turmoil in emerging markets has hit sentiment hard just as prices were trying to cope with weaker data out of China,” said Mark Newson-Smith, head of sales at Xconnect Trading Ltd. in London.
Aluminum for delivery in three months slid 0.6 percent to $1,731 a metric ton by 10:12 a.m. on the London Metal Exchange after touching $1,726.75, the lowest since July 2009. Chinese financial markets will shut for a week starting tomorrow as the nation celebrates the Lunar New Year.
“The coming Chinese New Year has reduced volumes and coincided with more withdrawal of liquidity from the Fed,” Newson-Smith said.
Turkey, South Africa and India raised interest rates this week to support their currencies. The MSCI Emerging Markets Index retreated 2 percent this week. Less stimulus “eventually is likely to raise the cost of money, and that could have a big impact on the viability of financing deals, which could hit aluminum, zinc, nickel and possibly even copper,” said William Adams, an analyst at FastMarkets.com in London.
Financing transactions involve buying metal for nearby delivery while making a forward sale to benefit from a market in contango, when prices rise for future delivery
Copper for delivery in three months declined 0.1 percent to $7,120 a ton in London, poised for a seventh daily retreat and a 3.3 percent monthly drop. The metal for delivery in March fell 0.1 percent to $3.2375 a pound on the Comex in New York.
Zinc slid for a seventh day in London, the longest losing streak since October 2012. Nickel declined for a sixth day, the lengthiest run of losses since Nov. 12. Tin and lead fell.
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